Consumer & Worker-Owned Cooperatives

Businesses like Frida,Inc. have found using a worker co-op as the best fit for business succession of their substantial social enterprise. Frida Inc. is owned by two partners who have built up a very successful business over 30 years, with hundreds of employees. They run a highly participative workplace known for high standards for quality, customer service, and community involvement. Like many other successful social entrepreneurs, these partners want to:

get their investment out of the businesses, at least for their estates

Worker co-ops are just one example of the many types of co-ops. Here are a few that Deborah Groban Olson has worked with:

Housing co-ops: To get more affordable or more congenial housing co-ops. (See: Mustard Tree Co-op)

Worker co-ops: To buy an existing business or build a new one in which the workers have democratic control and equity interests commensurate with their work. (See: Frida Inc.)

Worker co-op created within an ESOP employee stock ownership plan: A company that owns stock through an ESOP, enabling it to use the many tax ESOP tax savings and advantages for raising and borrowing money. However, it has one-vote-per-person voting on all shareholder issues and a highly participative decision making structure. Atty. Olson created co-op style ESOP companies at MBC Ventures and Republic Container.The key difference between ownership by an ESOP and co-op ownership is their ultimate ability to keep the company independent. In an ESOP, the workers are beneficiaries of a pension plan that is controlled by a trustee (who may be appointed or elected). The Trustee’s duty is to the beneficiaries as retirees, who may be legally forced to sell the business if s/he gets a good offer. Co-op members are actual equity owners of their co-op interests. They have the final decision on any possible sale which usually requires a super-majority vote.

Childcare co-ops: To get high quality, affordable childcare in which the parents have a voice

Farm and Purchasing co-ops: To give farmers more control over the prices paid for their goods, how their goods are marketed, and to get equipment, feed, etc. at discount prices.

Consumer co-ops and buying clubs: To get natural, fresh, local foods or other consumer goods which are hard to get locally or to get them at a lower cost;

Consumer and Worker co-ops: The consumers want a special or local product and want to include the workers in making decisions and sharing equity. (See: High Five Co-op Brewery)

An EWOC is an enterprise where the majority of co-op members are employees and a majority of voting stock is owned by co-op members. A majority of the board of directors is elected by members on a one-vote-per-person basis. Advantages include:

Workers have more control over co-ops than ESOPs.

The sellers can get a fair price for their stock with less regulation.

The seller’s proceeds from a stock sale to a worker co-op may be tax-free.

Co-ops are less expensive and less regulated than ESOPs.

Sale to a co-op keeps the company independent and rewards the people who made it a success.

Support systems are important for start-up worker co-ops. To be sustainable, a start-up worker co-ops, (and especially those serving workers with limited education) need a supporting joint business resource or community support organization.That is why the Mondragon, Emilia Romagna, Evergreen Cooperatives in Cleveland, WAGES and the Arizmendi Co-ops in Berkeley, CA have all created mutual support organizations for back office and business development functions. The Community Economy Group (CEG) is building such a system in Metro Detroit. Through the CEG non-profit, Center for Community Based Enterprise, Olson connects start-up businesses with a co-op developer who can assist them with feasibility studies.The Southwest Detroit Construction Cooperative (SWDCC) example explains how a well-intentioned worker co-op ceased to survive when the back office support became unavailable.

Atty. Deb Olson helped us create the articles and bylaws for our new food co-op. We are very happy with the outcome. Her knowledge of other co-ops was quite useful. She was very engaged and responsive to questions. Her responses were prompt. She was willing to work within our financial constraints.

Katilin Koch & Mia Kania - Marigold Food Co-op

“When we founded our ESOP I was afraid that I was asking too much because of the unique provisions I wanted. I had talked to several other potential attorneys and advisors. They said “Why, and you can’t do that”. Deb cut through ESOP law and got our ESOP exactly like I wanted and it has worked beautifully. Deb is smart, fast, knowledgeable and efficient. I would recommend her for anyone considering employee ownership.” –Bill Carris, selling owner & current board chair, Carris Reels, Inc.

UFCW members are excited to own a majority of HAC stock and are eager to work with management to achieve continued success for the company. We take seriously the responsibilities that come with ownership, representation on the board of directors, and a voice in major corporate decisions. –Ricky Burris, President,UFCW Local

Before the ESOP, we had 100% employee turnover in our Michigan and North Carolina facilities. Now that the ESOP owns the company, turnover is 20% company wide. Although many of our jobs are physically demanding, our company has become an employer of choice. –David Fitzgerald,CFO, Carris Reels

Our firm would not be the strong, participative, growing ESOP company it is today without Atty. Deborah Groban Olson’s guidance over the past 15 years. When we hired Deb, our company was undergoing major changes and the employees almost lost ownership of the company. Deb helped us work through complex legal matters to make difficult, but necessary decisions. She helped labor and management understand necessary changes and took the heat out of many discussions between them which led to our current cooperative relationship. Deb’s work has been thorough and prompt and she has been available to speak with us whenever needed. –Mary Landry, Board Chair, MBC Ventures, Inc.

The residents were overjoyed when we became owners of our building through the Mustard Tree Co-op. We had many challenges and believed that co-op ownership was vital to preserving our community. We were looking for an attorney who had experience and was concerned about us. Atty. Deborah Olson has always been responsive, dedicated, and thorough and cared about the needs of our members. She involved us as clients in every step of our legal work and we learned a great deal. She helped us do things the right way. She has represented us or almost 20 years and we would strongly recommend her to others. – Sheree Walton, President of Mustard Tree Cooperative

Atty. Deborah Groban Olson is an excellent attorney, whom I would recommend highly to anyone. She has kept our ESOP current with the law and helped us fix ESOP problems that occurred before we hired her, and has worked with us to develop appropriate policy changes as our ESOP has matured. When we hired her there was a lot of mistrust between labor and management. She was able to diffuse concerns about ulterior motives, by taking a professional, fact-based approach to identifying and fixing legal problems. She has also connected us to outside resources as we have diversified. –Steve Mullan, CEO, MBC Ventures, Inc.

Attorney Deborah Groban Olson leads the Community Economy Group. The Group’s mission is to create a successful Metro Detroit-based, business group built on values of cooperation, commitment to community and sustainability, utilizing Metro Detroit’s unique resources. They provide technical support to businesses and organizations committed to building community wealth through worker ownership or development of other community assets.

Attorney Deborah Groban Olson has specialized in creating and advising employee-owned companies and many kinds of cooperatives since 1981. Olson and team’s mission is to help companies and employees by providing tools using broad equity ownership to grow sustainable businesses and communities, and to provide families with tax advantaged ownership transitions.

Best Uses of ESOPs (Employee Stock Option Plans): Sale of a family-owned business, sale of a majority interest in a company business, where payroll is a high % of operating expenses, where broad based employee ownership is desired, when a company and sellers have use for tax deductions.